QUESTION 1 a) Consider a corporate bond that has a par value of $200 pays $80 at the end of each year in coupon payments, and this bond has 4 years of maturity. Assume that the prevailing annualized yield on other bonds with similar characteristics is 8%. Calculate the appropriate market price of the bond. Compare the present value of the bond with the par value of the bond. B). AXE declares dividend on regular basis and their dividend growth rate is 7%. The required return for this company is 10% and the current market price of AXE is RM17. Calculate the most recent dividend the company pays to their 25,000 shareholders.

QUESTION 1 a) Consider a corporate bond that has a par value of $200 pays $80 at the end of each year in coupon payments, and this bond has 4 years of maturity. Assume that the prevailing annualized yield on other bonds with similar characteristics is 8%. Calculate the appropriate market price of the bond. Compare the present value of the bond with the par value of the bond. B). AXE declares dividend on regular basis and their dividend growth rate is 7%. The required return for this company is 10% and the current market price of AXE is RM17. Calculate the most recent dividend the company pays to their 25,000 shareholders.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 7DTM

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